Different Strokes

International hotel chains are using a multibrand and asset-light strategy to grow faster.

- Aatish Nath

The hospitality industry is booming in India. Travel and tourism grew 8.5 per cent in 2016, faster than in any other country, according to a World Travel and Tourism Council report. Tourism already contributes 7.5 per cent to the country’s Gross Domestic Product (GDP), and is expected to grow at a compound annual growth rate (CAGR) of 16.1 per cent for the next five years, says a 2017 KPMG report. Not surprisingly, both local and global hotel chains are bullish about their prospects. The introduction of the Goods and Services Tax (GST), instead of the multiple taxes imposed on hoteliers earlier, has further encouraged them, even though hotels with room rates above ₹7,500 per night have been put in the highest GST bracket of 28 per cent. Occupancy has bee n steadily growing, as seen from an ICRA report of August 2017, which notes that revenue per available room (RevPAR) has been increasing for the last 12 quarters, even though average room rates have hardly risen at all in this period – barely one or two per cent.

But there is a vital difference between the ways local and global hotel chains are growing. In February this year, the Taj Group of Hotels Palaces Resorts Safaris announced it was doing away with its Gateway and Vivanta by Taj brands, folding these properties into its flagship Taj brand. “It’s becoming increasingly difficult for customers to differentiate between 10 to 15 brands of the same hotel chain,” says Chinmai Sharma, Chief Revenue Officer, Taj Group. “We went through a large internal exercise, discussing the matter with our guests, our loyalty members, and our staff and associates. What we realised was that at the end of the day, everyone basically wants a hotel with delicious food and beverage offerings, clean rooms which provide a great sleep experience, and some good experiences at the unit level. Brands don’t matter so much.”